Do You Get What You Deserve? Factors Affecting the Relationship between Productivity and Pay

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Do You Get What You Deserve? Factors Affecting the Relationship between Productivity and Pay Using a sample of 5,645 academics in more than 200 colleges and universities across all academic fields, this study investigated factors that affected the strength of the relationship between productivity, measured by publication, and pay. The fundamental argument was that factors that tended to reduce uncertainty or ambiguity in the evaluation and salary-determination processes would increase the effect of productivity on pay. The results indicated that productivity had a larger effect on pay in departments that (1) had stronger norms emphasizing research, (2) were located in private and higher quality institutions, (3) were in institutions that were governed by collective bargaining agreements, (4) were characterized by more research collaboration and more social contact among the faculty, (5) were in academic fields with more highly developed scientific paradigms, and (6) had chairpersons with shorter, fixed-length terms. The pay-determination process differed in expected ways between universities and four-year colleges. Even in contexts in which productivity could be readily assessed and in which merit was emphasized, the effect of performance on pay was comparatively small. (*1)

For a large percentage of the workforce in the United States, earnings are determined by and in organizations, which has led to growing interest in the wage-determination process within organizations (e.g., Pfeffer, 1977; Baron, 1984; Szafran, 1984; Tolbert, 1986). How organizations allocate rewards such as salaries to individuals is part of a more general concern with reward allocation in social systems (Leventhal, 1976). As Ferber and Loeb (1974: 69) have argued, "One of the basic tenets of the private enterprise system is that income should be distributed according to contribution." One of the themes that has come to dominate both the more general literature on reward allocation and the literature on pay in organizations is precisely the connection between pay and performance (Medoff and Abraham, 1980; Bishop, 1987; Kanter, 1987; Baker, Jensen, and Murphy, 1988).

Several prominent theories emphasize the importance of productivity in determining earnings. In the neoclassical economic tradition, human capital theory emphasizes the connection between productivity and earnings (e.g., Becker, 1962, 1964; Mincer, 1970; Frank, 1984). As Baker, Jensen, and Murphy (1988: 594) have noted, "Economic models of compensation generally assume that higher performance requires greater effort. . . . In order to provide incentives, these models predict the existence of reward systems that structure compensation so that a worker's expected utility increases with increased productivity." In the sociological tradition, the Wisconsin status-attainment model emphasizes this same link between productivity and rewards (Horan, 1978: 538). Other theoretical traditions question the universality of the link between earnings and productivity. For instance, the dual economy literature argues that workers in the periphery receive few returns on their productivity-related characteristics (e.g., Tolbert, Horan, and Beck, 1980; Kalleberg, Wallace, and Althauser, 1981; Dickens and Lang, 1985). Similarly, literature that has examined gender and race stratification has examined the hypothesis that men earn higher returns to their productivity-related characteristics than do women (e.g., Treiman and Terrell, 1975; Borjas, 1983; Semyonov and Kraus, 1983; Buchele and Aldrich, 1985) and that the majority race or ethnicity earns higher returns on productivity-related attributes than does the minority race or ethnicity (e.g., Borjas, 1983; Shapiro, 1984; Yogev and Shapira, 1987; Semyonov, 1988). Empirically, there is evidence that pay is often not related very strongly or at all to differences in performance (e.g., Lawler, 1971; Medoff and Abraham, 1980; Bishop, 1987; Baker, Jensen, and Murphy, 1988).

This evidence has been cited to support the idea that the structure of labor markets and the institutions employing labor determine income inequality beyond the effect of individual differences in human capital or productivity. Exactly what constitutes "structure," however, is often unclear. Baron and Bielby (1980: 737) noted, "Unfortunately, the 'new structuralists' have yet to offer a coherent and consistent representation of the structurally contingent nature of attainment processes." Baron and Bielby (1980, 1984) argued that researchers must examine organizations to uncover the structural features affecting wage determination, a point made by others as well (e.g., Pfeffer, 1977; Stolzenberg, 1978; Tolbert, 1986). The project begun in this article seeks to elaborate which features of organizations result in greater or lesser effects of productivity on pay. Given the comparative paucity of empirical research on this topic, the present analysis is necessarily exploratory. We argue that uncertainty and ambiguity affect the salary-determination process, where such uncertainty and ambiguity derive from structural and normative features of organizations.

Undertaking this project required data fulfilling two specific requirements: first, the data had to include descriptive features of numerous employing organizations, and, second, the data had to include measures of productivity and income. We were able to locate a data set on college and university faculty that met both requirements. The present data were collected in 1969 from a representative sample of faculty in 303 institutions of higher education in the United States and include three different measures of productivity important to academia: teaching, service, and research publications. Although the results of a study of academic wage determination must be generalized with caution to other environments, given both the norms for salary determination in academic labor markets and the comparative advantage in actually measuring productivity compared to some other settings, this context seemed to be a reasonable place to begin testing some ideas about the circumstances under which productivity affects pay to a greater or lesser extent. Ferber and Loeb (1974: 69) have noted, "No one takes greater pride in rewarding people for merit alone than academicians." Bishop (1987: S37) has also argued that in sports, art, and research, "productivity is both highly visible and highly variable."

We should note at the outset that although there has been a large literature on the academic pay-determination process, a large fraction of that literature has been developed either from studies of single academic disciplines (Tolles and Melichar, 1968; Siegfried and White, 1973; Tuckman and Leahey, 1975; Schwab and Dyer, 1979), or, even more frequently, from studies at single academic institutions (e.g., Katz, 1973; Koch and Chizmar, 1973; Ferber and Loeb, 1974; Kaun, 1984; Brittingham et al., 1979). Although these studies are very useful in understanding pay determination, by their very nature they do not permit the exploration of factors that affect pay determination across different organizational contexts. Even those studies that have examined academic pay using broader national samples (Ferber and Kordick, 1978; Tuckman, 1979; Hargens and Hagstrom, 1982) have not explored how different organizational and academic field attributes affect the salary-determination process, and none of these studies has investigated what factors are associated with differing returns to academic productivity. Thus, this study relies on the existing literature for control variables and model specification, but arguments must be more generally derived from theoretical discussions of the relationship between productivity and pay.

The hypotheses tested in the present research concerned the contexts in which productivity had a greater or lesser effect on salary. Thus, we formulated a model in which the direct effects of productivity and individual, organizational, and labor market characteristics were controlled and examined the significant interactions between productivity and context on salary. Although we had measures of both teaching and research productivity, we found that only research productivity was positively related to salary. Teaching, measured either by number of classroom hours per semester or by number of student contact hours per semester, was negatively related to salary. This was true even in four-year colleges, which we expected to have a greater emphasis on teaching. Furthermore, publication has been the indicator used consistently in previous studies of academic pay determination. Since in all theoretical accounts productivity is either positively related to pay or, at worst, does not affect pay, it seemed to make little sense to try to explore those conditions under which teaching had a less negative effect on pay. Thus, we use publication as the measure of faculty productivity in this study.

BACKGROUND AND HYPOTHESES

Our principal argument is that the strength of the link between productivity and pay diminishes under conditions of uncertainty in the evaluation and salary-determination processes. The literature suggests that there are numerous reasons for linking pay to productivity (e.g., Frank, 1984; Bishop, 1987), and the use of merit for determining reward allocations appears to be an especially strong norm in academia (Ferber and Loeb, 1974). Given these facts, we argue that the presence of uncertainty or ambiguity in the evaluation and salary-determination process is one factor that diminishes the strength of the relationship between productivity and pay. This uncertainty is generated when the evaluation of productive output is ambiguous and when the nature of the salary allocation process is such that it is hidden from examination. We first explore this general theoretical argument and then develop more specific hypotheses about organizational features that are related to conditions of uncertainty and, consequently, to the connection between productivity and pay.

Numerous studies have demonstrated that under conditions of uncertainty, more subjective, particularistic criteria are used comparatively more, and objective, universalistic standards are used comparatively less in decision making. Pfeffer, Salancik, and Leblebici (1976) found that there was a stronger relationship between institutional membership on National Science Foundation advisory panels and institutional receipt of grant allocations in sciences that had less developed scientific paradigms and, consequently, more uncertainty (Lodahl and Gordon, 1972). Pfeffer, Leong, and Strehl (1977) observed a similar relationship between membership on editorial boards and publication in journals. Salancik and Pfeffer (1978) reported that under conditions of uncertainty, experimental subjects were more likely to base their decisions on whom to hire on criteria of social similarity. Furthermore, to the extent that both the information used to make the decision and the identity of the decision maker were secret, this effect was increased. Thus, not only uncertainty about the cases but also ambiguity about the decision process seemed to increase the use of social similarity in choice.

In literatures even more proximately relevant to salary allocations, similar arguments have been advanced. Leventhal (1976), for instance, has argued that proportional rewards are less likely when there is task interdependence, so that evaluations of contributions are problematic. However, he has argued that secrecy in the allocation process increases the extent to which reward allocations are proportional to performance (Leventhal, Michaels, and Sanford, 1972). Monitorability has been advanced in the economics literature, as well, as a factor that affects the pay-performance relationship (e. …

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